S&P says France must deliver budget cuts to protect rating

FRANCE needs to deliver promised budget cuts if it wants to avoid a further credit rating downgrade, Standard & Poor’s lead analyst for France said yesterday.

S&P, which stripped France of its coveted AAA rating in January 2012, could confirm the current AA+ rating if the public debt ratio looked set to stabilise, but Marko Mrsnik says it remains to be seen if France can achieve that in 2015.

“We take on board expectations that in the 2014 budget there will be additional measures that will move the position towards smaller deficits,” Mrsnik said.

“We expect mild recession this year and slow recovery thereafter.”

The ratings agency forecasts the economy will shrink 0.2 per cent this year and grow 0.6 per cent next year – half the government’s 2014 forecast. S&P expects France to cut its budget deficit to 3.3 per cent of output next year from 3.8 per cent this year, slightly more pessimistic than the government but more optimistic than the EC’s projections.

“We see the French general government debt increasing this year and next ... It remains to be seen whether it can stabilise in 2015,” Mrsnik said.